Md. construction slump evident at auction

April 30, 1991|By Ted Shelsby

Dump trucks -- more than a hundred of them -- were lined up on the wet grass field at Bowie Race Track yesterday along with dozens of giant backhoes, tractors and graders.

Everything needed to rebuild war-torn Kuwait was there, but the army of construction equipment had little to do with hard times in the Persian Gulf country. It was primarily a sign of poor economic times in Maryland.

The equipment -- about 1,100 different items -- was being sold at auction primarily because of a sharp cutback in commercial real estate development and a freeze on state highway construction that have put a financial pinch on construction companies around the state.

"I've never seen so much equipment," said Pierce Flanigan, president of P. Flanigan & Sons Inc., a Baltimore contracting company. "Big backhoes all lined up in a row, dozens of them, and they cost $350,000 to $400,000 new."

The sale, which began yesterday and continues today, is the largest equipment auction in Maryland's history, said Robert E. Latham, executive director of the Maryland Highway Contractors Association, a trade organization.

Mr. Latham said that the sale marked the "beginning of the liquidation of the transportation construction industry" in the state. He estimated that "well over 75 percent" of the equipment auctioned off was from companies belonging to the association.

While he did not want to use individual company names, Mr. Latham said one company was selling about 20 percent of its equipment to raise the needed capital to make it through tough times yet to come. Others are selling to cut overhead costs. "One company is selling because its equipment is financed and it is having trouble making payments." In some other cases, he said, the equipment being auctioned has already been repossessed.

As an indication that the rough times are not over, Mr. Latham said, contractors are being told there will be no more state highway work until July 1992 at the earliest.

That's pretty much the case as things stand now, according to Stephen G. Zentz, Maryland's deputy secretary of transportation. As a result of the General Assembly's refusal to approve funding requests for the department, he said, the state stands to lose "in excess of $150 million" in federal funds to be used for work on highways, bridges and roads.

He said another $100 million in interstate discretionary funds also are at risk. The state put a freeze on major highway construction work in early December.

Mr. Flanigan called the industry's problems "a catastrophe."

"About a year ago, the private market [paving parking areas] dried up when banks cut back on financing developers," he said. "About the same time, the state was telling us there were no major projects coming."

As a result, Mr. Flanigan said he has been forced to lay off about half his company's workers, cutting the force from 225 during busy times to 110 today.

Yvon Bergevin, president of the Driggs Corp. in Capitol Heights, said he has been forced to lay off 25 percent of his company's workers since last year.

He said cutbacks in state highway construction are "having a tremendous impact on the industry. I'm not saying that we are at the point of no return, but we're heading there."